bsc case study telecom fiji
TRANSCRIPT
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Strategic management and the balanced scorecard: A case study of a
telecommunication company
Umesh Sharma*
Department of Accounting
Waikato Management School
University of Waikato
PB3105
Hamilton 3240
New Zealand
e-mail: [email protected]
Stewart Lawrence
Waikato Management School,
University of Waikato.
Alan Lowe
Aston University,
UK.
*Corresponding author
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Strategic management and the balanced scorecard: A case study of a
telecommunication company
Abstract
Purpose: This paper presents some evidence on an aspect of the design of a strategic control
at a micro level within Telecom Fiji Limited. The research aims to illustrate how the
balanced scorecard (BSC) has been used by the company as a calculative tool to enrol
employees on the path to commercial business routines as the organisation moved from
corporatisation to privatisation. The major focus is on BSCs implementation and practice.
Design/ Methodology/ Approach: a case study method is applied which was chosen to
illustrate the use of BSC model. It utilises qualitative field study approach to provide an
understanding of BSC implementation. Institutional and practice theory are utilised to inform
the case study.
Findings: BSC was used internally to bring employees on board for privatisation path and
encouraged employees to focus on customer and shareholder perspective. Employees were
rewarded for reasonable scores in the BSC through quarterly performance bonuses.
Research limitation/ Implications: The analysis is limited to one case company, thus no
generalisation, except to theory, can be implied.
Originality/ Value: Few studies have reviewed BSC in organisations that made transition
from public sector to private company. Combining insights from the emerging practice-
based literature on strategy and institutional theory, the paper examines how BSC contributed
to shape the strategy at TFL.
Keywords: performance measurement, employee share scheme, strategy formulation,
institutional theory, management control systems, Fiji.
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Strategic management and the balanced scorecard: A case study of a
telecommunication company
1. Introduction
The relationship between strategy and management control has been researched over the past
two decades (Chenhall, 2005; Nyamori et al., 2001; Lord, 1996). The research on strategy
and management control has developed over time from being dominated by a contingency
perspective whereby strategy and management control have been treated as essentially given
or exogenously determined to how management controls are implicated in strategic change.
The broader literature has shown an increasing interest in aspects of strategy formulation and
practice at the level of individual manager (Johnson, 2000; Johnson et al., 2000; Modell,
2009; Lowe & Jones, 2004).
Strategy is perceived as imperative for the organisation since it is the key element leading the
organisation into future- guiding actions, plans and results (Modell, 2009; Lowe & Jones,
2004; Nayamori et al., 2000; Lawrence & Sharma, 2002). Bunce et al., (1995, p.253) note
that as strategies are changing in response to many competitive and structural pressures, it
seems evident that new management systems are needed to reflect these new realities.
Several scholars have addressed the emergence of performance management systems using
not only financial, but also nonfinancial measures and relating them to strategy (Kaplan &
Norton, 1992, 1993, 1996; Lynch & Cross, 1991; Nor-Aziah & Scapens, 2007; Neely et al.,
2001).
This paper presents some evidence on an aspect of the design of a strategic control at the
microlevel, within Telecom Fiji Limited. It provides information about how a
telecommunications company utilised financial and non-financial measures in the form of a
balanced scorecard to align its strategy. The research question being asked is: how did BSC
get implemented and embedded in practice at TFL? Was there any resistance to such
practices? To what extent did the BSC have to be modified from the four perspectives
advocated by Kaplan and Norton (1992) to suit Telecoms context? The research used a
qualitative field study approach to provide an understanding of strategy formulation. The aim
is to contribute to an area of literature which is of increasing significance, but relatively
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underdeveloped in terms of application of in-depth field research techniques. Combining
insights from the emerging practice-based literature on strategy, management control and
institutional theory, the paper examines how the formation of management control practices
contributed to shape the strategy of Fijian Telecommunication Company which made
transition from a public sector to privatised company over 1989-2002. The paper examines
the role of managers within the process of identification of key performance indicators, and
more broadly the formulation of a strategic performance measurement practice
Where do new practices come from? While institutional theory research has been widely
renowned for its emphasis on tracing how novel innovations or activities become established
or taken-for-granted practices as a result of isomorphic diffusion, little work in this tradition
has addressed the origins of new practices (Scott, 2001; Lounsbury & Crumley, 2007;
Lounsbury, 2008). Part of the problem is that diffusion studies have normally treated
practices as objects that are either adopted or not, essentially precipitating the routine
acceptance of practice (Lounsbury & Crumley, 2007, p.994). This structural emphasis on
institutionalised processes has resulted in a number of critiques about the lack of attention
paid to the role of actors in creating and promulgating innovations (DiMaggio, 1988;
Greenwood & Hinings, 1996; Lounsbury, 2008; Seo & Creed, 2002; Lounsbury & Crumley,
2007). Within institutional theory, this broader structure-agency debate is often referred to as
the paradox of embedded agency (Friedland and Alford, 1991; Seo & Creed, 2002; Holm,
1995). The theoretical puzzle is as follows: if actors are embedded in an institutional field
and subject to institutional constraint (Clemens & Cook, 1999; Seo & Creed, 2002), how are
they able to envision alternative practices and then subsequently get others to adapt them?
One response to this disquiet has been the introduction of the concept of institutional
entrepreneur, featuring the role of powerful actors who are able to reshape social
organisations and help establish a new dominant practice (Garud, et al., 2007; Greenwood et
al., 2002; Lounsbury & Crumley, 2007). The concept of institutional entrepreneur is covered
more in-depth in the ensuing theoretical framework section.
The paper proceeds in the next section to outline the prior literature on balanced scorecard
and strategy, which is followed by the theoretical perspective adapted for the study. We
discuss how institutional and practice scholarship can be combined to shed light on practice
creation, motivating our empirical case. The case company is then described followed by the
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research method. The next section of the paper presents the empirical evidence on the
strategic business plan and balanced scorecard as practiced at Telecom Fiji Limited (TFL).
This is finally followed by a discussion and conclusion section.
2. Balanced Scorecard and Strategy
Various authors have previously reviewed the BSC framework (Farneti & Guthrie, 2008;
Norreklit, 2000, 2003; Kaplan & Norton, 1996, 1998, 2001; Butler et al., 1997; Kloot &
Martin, 2000; Figgie et al., 2002). The CIMA (2005) report calls for research that focuses on
the implementation and practicability of the BSC framework.
The concept of strategic performance measurement such as BSC was developed in response
to the criticism that traditional performance management systems are financially driven and
historically focused (Kaplan & Norton, 1993). The traditional BSC was structured as a tool
to complement financial accounting measures, and provide non-financial measures, including
the activities of the organisation that can be regarded as operational, such as customer
satisfaction, internal processes and innovation. The BSCs four dimensions encompass
financial perspective, customer perspective, internal business perspective and innovation and
learning perspective (Kaplan and Norton, 1992). The BSC was developed as a tool to
develop strategy management, linking strategies and performance indicators.
Roselender & Hart (2003) suggest that strategic management accounting seeks to integrate
insights from management accounting and marketing management within a strategic
management framework. The marketing accountability project identifies the necessity to
employ multiple performance measures in a reporting format such as a balanced scorecard
(Roselender & Hart, 2003). Atkinson (2006) suggests that the essence of strategy
implementation suffers from a general lack of academic attention. The balanced scorecard
has been offered by its inventors as ...the cornerstone of a new strategic management
system.... (Kaplan and Norton, 1996, p.75), positively linking an organisations long-term
strategic intentions with its short term operational actions.
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The balanced scorecard was developed to address a number of significant weaknesses
associated with traditional performance measurement systems- including particularly, that
they are dominated by short-term or financial metrics that are internally oriented and are not
linked to organisational strategy (Eccles, 1991; Lynch & Cross, 1991; Kaplan & Norton,
1992; Norreklit, 2000; Hoque & James, 2000). BSC makes explicit the link between
strategic objectives and operational goals, by identifying clear performance targets at all
levels in the organisation, and by engaging employees at all levels of the organisation in the
discussion of the strategic priorities. Atkinson (2006) underscores that the effective
integration of the balanced scorecard with strategic and management control systems,
however, remains a potentially significant inhibitor to successful strategy implementation.
According to Otley (2003), it appears that designers of performance management systems do
not fully anticipate the likely response of those being controlled.
The BSC has found favour in many organisations (Chenhall and Langfield-Smith, 1998;
Hoque & James, 2000; Lawrence & Sharma, 2002; Sharma & Hoque, 2001). Given the
obvious benefits of a BSC, it is assumed to be relatively unproblematic to implement in a
logical and sequential fashion (Northcott & France, 2005). However, this view is challenged
by academics and practitioners who have found the BSC elusive and problematic to
implement (Ittner and Larcker, 1998; Norreklit, 2003; Sandhu, Baxter & Emsley, 2008). The
implementation process brings together managers from different organisational functions,
such as accounting, marketing operations and human resources (Sandhu et al., 2008). Sandhu
et al., (2008) suggest that a network of actors, both human and non-human is involved in
translating a BSC.
Norreklit (2003) suggests that the BSC may be good at justifying cost reductions and at
making employees increase their level of customer service. Through the BSC employees
need to show themselves and their surroundings that they are in control of the uncertainty
involved in their jobs. They do so by becoming isomorphic relative to their surroundings and
adopting the behaviour of others (Meyer & Rowan, 1977; DiMaggio & Powell, 1983, 1991).
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Ax and Bjornenak (2005) examine the communication, diffusion and transformation of the
BSC in Sweden from a supply side perspective. They argue that BSC perspectives can be
examples of stakeholder rather than shareholder models. They cite an example of a scorecard
developed in a Swedish state school that includes a financial perspective, a student
perspective, a teacher and staff perspective, a development perspective and a school
administration perspective. The current study in telecommunication intends to examine the
various perspectives employed within company and whether it extends the perspectives
conveyed in the original Kaplan and Norton literature on BSC. Ax and Bjornenaks (2005)
study noted that in addition to Kaplan and Nortons four perspectives, the majority of
Swedish organisations include an employee perspective. The next section examines the
theoretical basis for the study.
3. Theoretical Framework
Institutional theory and practice theory have been adapted for this case study. Particularly
useful to institutional theory is the attempt by some practice scholars to draw on activity
theory (Engestrom, 1999) and to perceive practice as subsuming activity (Lounsbury &
Crumley, 2007). Ahrens & Chapman (2007) employ practice theory in considering the role of
management accounting in the constitution of organizations. They build on Schatzki (2002,
2005) for their particular version of practice theory. According to Ahrens & Chapman (2007)
using practice theory enabled them to describe management control systems as structures of
intentionality which both shape and are shaped by shared norms and understandings in the
interrelationships between technical and interpretive accounting processes.
According to Schatzki (2002, 2005), social practices are organized by human activities.
Jarzabkowski (2005) views activity as the action of and interactions between actors as they
perform their daily routines, while practice refers to activity patterns across actors that are
infused with broader meaning and provide tools for ordering social life and activity.
Lounsbury & Crumley (2007) posit that activity involves acts that are generally devoid of
deeper social meaning or reflection such as pounding a nail, while practice, such as
professional carpentry, provides order and meaning to a set of otherwise banal activities.
Defined this way, practice is seen as a kind of institutionally- taken-for-granted set of rules
and routines (Lounsbury & Crumley, 2007; Lounsbury, 2008; Seal, 2010).
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By focusing more on actors and organizational heterogeneity, institutional theorists may seek
connections to currently fashionable domains such as practice theory that have been
somewhat influential in contemporary studies of accounting (Ahrens & Chapman, 2007;
Hopwood & Miller, 1994; Lounsbury, 2008; Malmi & Granlund, 2009; van Helden,
Aardema, ter Bogt, Groot, 2010; Baldvinsdottir, Mitchell & Norreklit, 2010). The theoretical
gap between actor micro-processes and institutions provide an opportunity for theoretical
development and empirical insight, and the new directions of institutional analysis to be
explored (see Lounsbury, 2008). Combining institutional theory and practice theory in this
paper offers a new direction for institutional analysis in capturing organisational
heterogeneity and practice variation (Lounsbury, 2001, 2008) by allowing a focus on actors
and their activities. A practice perspective offers a way of understanding the diverse
activities involved in balanced scorecard practice at TFL.
Given this approach to practice as a kind of institution, the research question giving our
efforts is: how may innovation such as BSC in activities lead to the establishment of a new
practice via institutionalization? Institutional theorists have long grappled with the issue of
how institutionalized structure and agency exercised by actors with vested interests influence
each other (Barley and Tolbert, 1997, DiMaggio, 1988; Hirsch and Lounsbury, 1997).
Research on institutional sources of practice variation has only began to be developed (Burns
& Scapens, 2000; Siti-Nabiha & Scapens, 2005; Modell, et al., 2007; Seo & Creed, 2002;
Dorado, 2005; Beckert, 1999; Sharma & Lawrence, 2008; Sharma, Lawrence & Lowe, 2010).
The problem of embedded agency may be resolved to some extent by institutional
entrepreneurs who act as internal change agents in the organisation (Benson, 1977; Beckert,
1999; Seo and Creed, 2002; Dorado, 2005). The term institutional entrepreneurs refers to
actors who have an interest in particular institutional arrangements and who leverage
resources to create new institutions or to transform existing ones (Maguire et al., 2004,
p.657). Garud, Hardy and Maguire (2007) put forward that juxtaposing institutional (taken-
for-granted rules and routines) and entrepreneurial forces into a single concept, institutional
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entrepreneurship offers opportunity for understanding how and why certain novel practices or
new organizational forms come into existence and become well established over time.
Institutional contradictions allow institutional entrepreneurs to disrupt existing routines
within an institutional arrangement. Institutional structure, informal rules and taken-for-
granted rules and routines come under pressure from agents who recognize that these factors
constrain more efficient outcomes. There is an ontological position that understands the
world as always in flux and that the new practices lie in the everyday activities of actors
(Lounsbury, 2008).
In many organizations, the management control system constitutes the stable rules and
routines which enable and constrain actions (Scapens, 1994; Burns and Scapens, 2000).
Rules are the formally recognised ways in which things should be done while routines are
defined as the way things are actually done (Burns and Scapens, 2000, p.6). Rules capture
the formal characteristics of an accounting system: for example, rules are standard operating
procedures, budget manuals and appraisal guidelines. The Burns and Scapens (2000) model
of institutional theory emphasises the stability embodied in rule-based behavior and routines
in organizational systems. Nevertheless, to study accounting change we need to study
institutional contradictions that give rise to changes in rules and routines via institutional
entrepreneurs.
Practice theory emphasizes the role of actors in drawing upon rules and routines of
management control practice (Seal, 2010; Lounsbury & Crumley, 2007). The theory assumes
that actions are organized around practical understandings, rules and engagements that define
and connect agents qua practitioners (Ahrens & Chapman, 2007). Practice is shaped through
purposeful activities and as a concept seeks to capture actors skilful working with and
constructing of understandings, rules and routines (Ahrens & Chapman, 2007; Burns &
Scapens, 2000; Burns & Baldvinsdottir, 2005). The rules and routines are discursive and
practical resources that actors manipulate skillfully to signal interests, motivation and
achievements. Our practice perspective emphasises the way in which BSC come to be
constructed through the daily activities of individuals engaging with each other and
interacting with management control systems.
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While there have been other attempts to address the relationship between innovation and
institutions (Burns & Scapens, 2000; Dillard et al., 2004), there have been no explicit efforts
to draw upon practice and institutional theories to address how new practices are created and
enacted. The next section presents the research method for the case company.
4. Research Method
The case study was conducted over a 6 year period from 2002 to 2007. Our research study
made use of multiple sources to collect evidence. Data were gathered from four sources:
publicly available information, including TFL annual reports for the last fifteen years; media
and government reports; internal proprietary documentation, including board papers; and
semi-structured interviews.
The researchers were also given internal proprietary documentation such as TFLs Strategic
Business Plan, annual reports and performance evaluation templates. Media reports were
obtained from the National Archives of Fiji in Suva. The reports as far back as 1990
described the organizational culture prior to TFLs corporatization. Government reports were
obtained from the National Archives of Fiji. These reports included parliament papers
pertaining to TFL when it was government-owned, together with other documentation such
as an enquiry report on FPTL affairs which covered a period when there was open
resistance to corporatization. Compared to a single source of data, these multiple data
sources helped provide a more comprehensive and valid portrayal of the phenomenon (Jick,
1979; McKinnon, 1988; Modell, 2005; Perera et al., 2003). TFL annual reports were used to
provide an understanding of the history of the organisation and to facilitate the interviews.
The interviews were carried out between 2002 and 2007. Interviewees were asked to reflect
on past events surrounding the privatization of TFL as well as the current implementation of
new management control practices such as balanced scorecard. Forty two semi-structured
interviews were conducted at TFL, each lasting from one to two hours. Twenty five staff
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were interviewed at head office in Suva and its branches in Nadi, Lautoka, Ba and Tavua.
Interviews ranged between 6 and 8 in each year from 2002 to 2007. Some interviewees such
as quality manager, strategic manager, public relations officer and accountants were visited
more than once to clarify information and review our picture of the change process. The
interviewees were selected from different sections of TFL such as the Finance, Human
Resources, Customer, Public Relations and Strategic Management divisions. The interviews
took place in formal surroundings, either within the office space of employees or in the
companys board room. Most of the interviews were tape-recorded and were subsequently
transcribed. For a few interviews that were not tape-recorded, notes were made by one of the
researchers as the interviews proceeded. Furthermore, three informal contacts were made by
e-mail or phone. The informal contacts were particularly useful for checking or
supplementing evidence collected during the formal interviews.
While the data triangulation approach (Hoque and Hopper, 1997) adopted was useful in
enabling us to capture a contextual understanding of the social phenomena under study, it
also created challenges in terms of analyzing and making sense of empirical evidence
collected from various sources. To overcome this problem, the analysis was initiated by
preparing tables listing issues frequently raised in interviews in order to answer our research
questions: how were agents able to introduce MCS (such as BSC) within TFL? How were
BSC institutionalised at TFL? Several themes (such as business plan, shaping BSC and
initial reception, resistance to change and enactment of BSC) were drawn from these
responses. The data representing the themes were clustered together at this stage. The
documentary evidence collected was subsequently matched with themes (Tsamenyi et al.,
2006). In the last part of the analysis, we drew on our theoretical framework to make sense
of the data.
5. Background to the Case Company
TFL was of interest to the researchers as it was the first public sector enterprise in Fiji to be
fully privatized and listed on the South Pacific Stock Exchange through its parent company of
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Amalgamated Telecom Holding Limited. Accounting and organisational changes were
introduced and provided the focus for our study.
The Fiji government began to dismantle state-owned enterprises in the late 1980s and
corporatised many public enterprises, including Fiji Post and Telecommunications Limited
(FPTL). Under further restructuring FPTL was split into Telecom Fiji Limited (TFL) and
Post Fiji Limited in 1996. Currently, TFL is the sole provider of local and national (trunk)
telephone services. The company owns the only public switched telephone network in Fiji.
The TFL network comprises 55 telephone exchanges throughout Fiji, connecting more than
101,000 customers (Telecom Fiji website, 2010). In 1998 the Fiji government consolidated
all telecommunications companies into one company: Amalgamated Telecom Holdings
Limited (ATH). ATH owns all the shares in TFL. For the organisation chart of ATH, see
Appendix 1.
In 2002, the government floated its stock in ATH to the general public in an initial public
offering of $1.06 per share. The general public owns almost 7.2% of shares in ATH, while
the government holds 34.6% of the shares. The Fiji National Provident Fund has a
shareholding of 58.2%.2 ATH was formally listed on the South Pacific Stock Exchange in
Fiji on 18 April, 2002 (Telecom Fiji website, 2010). TFL describes its vision as Telecom
Fiji, bringing the best of telecommunications to the Pacific (TFL website, 2010). The
mission of the company is to:
- provide telecommunication products and services that our customers value
- strive for excellence in everything we do
- develop a capable workforce by rewarding superior performance and
- grow shareholder value (TFL website, 2010).
In April 2002, Internet Services Fiji Ltd (operating as Connect) was set up to take over
internet service provision at the retail level from TFL. TransTel Limited was formed on
2 The Fiji National Provident Fund is a superannuation company in Fiji. The employer and the employee each
contribute 8% of gross wages to the Fiji National Provident Fund.
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April 2003 to market and sell prepaid calling and internet cards and manage all public booths
on behalf of TFL.
Vodafone Fiji Limited (Vodafone) was incorporated in 1993 in the form of a joint venture
between Vodafone Europe BV Holdings (49%) and TFL. The latter has assigned part of its
domestic licence which deals with mobile communication to its subsidiary in which it has
51% shareholding. Vodafone has a customer base of approximately 154,000 (Amalgamated
Telecom Holdings Limited annual report, 2006). Xceed Pasifica was formed in April 2003,
taking over all customer premises equipment and related activities such as cabling from TFL.
Fiji Directories Limited was set up as a joint venture in 1993 between FPTL (90%) and
Edward OBrien Ltd (10%) and moved to ATH in December 2002 (Telecom Fiji website,
2010). The next section outlines the case findings for the study.
6. Case Findings
This section presents the findings in 3 subsections. The first subsection examines the
introduction of a business plan. This is followed by shaping BSC and its initial reception,
linking that to the strategy of the company. The third subsection examines reservations about
the possibilities of BSC.
6.1 Business Plan at TFL
This section examines the role of the business plan which is part of the management control
system at TFL and how accountants and management contributed to planning. The
accountants were pivotal in the establishment of commercial targets in the plan. TFL had a 5
year business plan, as evidenced by a strategic manager:
We have a business plan which company accountants were helpful in putting in place
and everything may need to be achieved in accordance to the plan. We have specific
profit targets on the plan which we are striving towards. The targets include
connection of lines, service restoration, revenue level, expected profits and so on.
TFL sets out its vision as: We are committed to building a better Fiji by being the best in
service, providing quality communications and making it easier for people to keep in touch
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and provide a better return on shareholders fund (TFL Strategic Business Plan, 2001-2006,
p.4). The vision was mobilized to encourage people to get themselves more challenging.
The management and workers were expected to work towards the business plan by the CEO
and the Board. The business plan was also developed with the assistance of Telecom New
Zealand consultants on the invitation extended by TFL CEO. The steering committee at TFL
was made up of key managers and accountants who helped to develop the business plan. The
plan focused on the aims of meeting customers expectations and cost reduction. The key
goals for five years were:
1. Financial- achieve revenue, profit targets which were in terms of return on
investment of 12.5% and debt to equity ratio
2. Development- add at least 8,000 lines per year and increase telephone penetration
to about 35 per 100 population
3. Reliable delivery of quality service on time, in full, every time, and
4. Be easy to do business with.
(TFL Strategic Business Plan, 2001-2006, p.10).
The business plan was a bulky document, intended to inform the management of the expected
targets. It may not be read by everyone except the senior management. The senior
management established new performance targets and benchmarks by which business
decisions and actions would be judged and perceived and formed part of management control
systems (MCS). The steering committee decided to publicise the plan throughout the
organization, down to the operational staff, ensuring it is an integral element of business
practices at TFL. Business plan pamphlets were distributed to staff while seminars were also
held to spread corporate awareness and develop new knowledge of the plan. The business
plan was designed to establishing new ways of thinking, as well as helping to dismantle old
taken-for-granted public service assumptions. A manager commented:
With the implementation of the business plan, some of us now aim to complete work
even if it is after 5:00p.m. This was not the case when we were with the government;
we might leave it for the next working day. But now completion of work has become
important practice for us.
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A strategic manager claimed that the business plan drove everything at TFL. According to
a manager, business processes were aligned to the business plan. So, the business plan was a
new rule that embodied the intended new ethos of the business, and to which other
organizational phenomena (systems, structure, practices, etc) should be aligned.
The Finance Strategic Business Unit employees played a significant role at TFL and advised
management on financial decisions, in terms of cost reduction and undertaking projects that
yielded positive net present values and EVA. In these contexts, the Finance division
employees recast dialogue from telecommunication language and engineering into their
business language of markets and profitability. The establishment of new accounting systems
had been vital in changing organizational practices from a centralized bureaucratic one to a
decentralized management one and in shaping new roles so that meaningful budgets and
performance reports could be established. Through business planning, the accountants,
public relations personnel, marketing managers and customer service managers increased
their power relative to engineers.
The management team was bound up in the creation of the business practice. While there
were some initial resistance when TFL was privatized, nevertheless with wider education and
performance based pay incentives, employees were bound to adapt new business plan. The
management and the finance teams, including a steering committee, were the institutional
entrepreneurs of the change. Seminars were conducted for the various operation managers by
Finance, consisting of financial awareness practices aimed at such topics as budget setting,
budget management, capital expenditure and cost reductions. A finance manager described
this as a skill transfer.
What we have been doing is a skill transfer- providing knowledge to operation
managers on decision making based on financial information. And we showed them
financial information and said this is how you use it.
The finance team attended team meetings to contribute to business decisions that previously
would not have concerned them. The operation managers appeared to embrace such
interactions and relationships with the Finance team. A strategic manager commented:
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Accountants are now more integrated into the business. Theyre more proactive and
help us. We often ask them to help us focus on what is needed for improvement.
Through the integration of accountants, thrift and concern for money became much more
important for TFL members. Accountants, as institutional entrepreneurs, continually advised
the managers of Strategic Business Units of sound business practices, becoming powerful
actors within TFL and well respected. A couple of managers spoke high of the management
accountants in their business units. They claimed that these management accountants guided
them in financial decision making and were highly regarded by the members in their division.
The business practices became new routine for TFL actors which was reinforced by the
business plan. The business practices was further enabled by the enactment of BSC. The
next section examines the shaping of BSC at TFL.
6.2 Shaping of BSC and its initial reception
This subsection examines managers perceptions of BSC and its initial reception. In the later
section, we will illuminate the opposition to BSC and how it was not working well for some
of TFL employees. The possibilities being attached to TFLs BSC were informed by the
transition of the organization to privatized company from a public sector entity. The idea was
to enroll actors into commercial business oriented ways of thinking. The CEO commented:
through BSC we measure output and the pay and job advancement is based on BSC scores.
This has been well communicated to the employees and they very well understand the
consequence of not working up to par. BSC was thought appropriate by the CEO to enable
actors to assimilate commercial business practices. Satisfying the expectations of
stakeholders such as customers and shareholders was pivotal for TFL managements business
units. TFLs corporate performance was measured using historical accounting measures;
there was little or no information on the underlying drivers of performance. Some senior
managers felt there was a need for more forward-looking measures and a better alignment
between performance management system and strategy. The BSC measures had to be
aligned with the companys business plan. A manager maintained:
if we dont align our staff to our companys strategy or goals, and if we are not measuring them, we wont be fulfilling those goals.
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Some senior managers and the CEO championing the BSC became aware of it during their
undergraduate studies and gained a better understanding while undertaking MBA studies. A
senior manager stated:
From what I understand, the BSC is a scorecard that measures the company
performance and drives the company towards achieving its goals and gain some
advantage by measuring financial results, customer results, internal processes and
learning and growth.
Some senior managers and CEO convened a meeting with other managers to float the idea of
BSC. Overall, the managers were receptive to the idea of implementing a BSC, with some
expressing genuine interest in it. Others were motivated to join the project because of an
awareness of senior managements intention of linking BSC to an incentive scheme. A
senior manager commented:
The last thing we want our guys is to come to work and get fortnightly wages and not
know how to contribute to the companys strategy the BSC will help us manage that. I want to make sure BSC is linked to their pay.
Measuring financial, customer, internal processes and learning and growth perspectives
possibly made the BSC attractive to each departmental manager because of possible
improvements that might emerge in their respective fields of work.
The BSC performance indicators were aligned with the business plan for the organization. It
starts with macro objectives, that is what the company likes to achieve in terms of its vision
and mission which filters down to the operational level. A manager stated:
BSC performance management system outlines what were expected to do and what were actually doing. Each business unit has its own measures. There are key areas one is measured on. The divisions are given their own targets- monthly targets and
then finally, of course, it comes to daily performance.
Another manager stated:
Generally if we do not measure performance of employees, then we simply cannot
manage them. BSC like PMS is used as a discipline exercise for employees.
All the employees have a job description and the key performance indicators are discussed
with them by the superiors. The BSC like performance measurement system took a year of
education. The new CEO and the Human Resource division staff were instrumental in the
education and implementation of BSC. External consultants were also involved in training
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18
staff to adapt the new BSC. The CEO advocated setting of goals of every people in the
company. A manager commented:
Through training, the staff developed an awareness that it is important to measure
performance.
The PMS document was continually revisited to simplify the document. From initially 5 to 6
pages, it was reduced to 2 pages. Initially employees were allowed to set KPIs for
themselves around four perspectives of the BSC. It became a bulky document and was
gradually reduced to two pages. Employees chose KPIs around their professional
development needs, reliability of customer services, punctuality to work, customer
complaints, in-house and external training needs amongst others. Initially, the workers and
employees did not lay emphasis in making a target explicit but rather on learning the process
of setting goals. A manager commented:
I think it is a struggle to set KPIS. I was sometimes not so eager to set clear targets.
Most managers find difficulty to set KPIS and they cannot identify good KPIs. But
they tried and began to manage to do so. It was a good challenge for them.
There were differences between managers. Some senior managers could set quantitative
measures but others could not. The CEO and the Human Resource Division were
instrumental in assisting the managers in order to share the long-range framework among the
managers.
BSC measures set by the CEO and management team involved a wide range of performance
indicators covering quality, human resources, operational and financial matters. The
employees were assessed by their superiors on a quarterly basis on indicators such as
customer service focus, business/financial focus, professional attribute/interpersonal
relationship, managing change and job expertise, and were assessed out of a total weighting
of 100%. Those getting 70% and above were entitled to a quarterly bonus (see Appendix 2
for performance measurement forms). Interviewees claimed:
These performance indicators were developed to make TFL employees more
customer focused and quality driven.
The performance indicators are seen as a means of motivating staff. The agreement
with workers is there in terms of setting objectives. Union was also consulted in the
process of target setting and they wanted the percentage to be around 70%. rather than
80-90% which the management was advocating.
Another manager stated:
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19
On every quarter, assessment is done. Every individuals assessment is done. Percentage rating is done which measures the amount of bonus. If one doesnt meet the target of 70% or more in the first quarter, then they can catch up with the targets
in second quarter and will be paid back bonus for the first quarter as well.
The BSC encompassed an open system where the targets were agreed with ones supervisor
which was then signed off. The managers actually worked out targets with subordinates.
The subordinates have to meet the 70% BSC KPIS. According to a manager, the employees
were given an opportunity to view the report and to respond as well. The employees may
also request for specific knowledge and skills to be developed for the BSC exercise. The
managers normally provide a short training program to improve ability of such employees.
The training used to happen on a regular basis. Some staff in Finance division were
encouraged to take Bachelors degree papers from the University of the South Pacific at their
own expense. On passing the paper, the company used to reimburse employees the
appropriate tuition fees. Participation in the BSC process needs to include the staff who will
be key users of performance measures (Lynch & Cross, 1991; Neely et al., 2001). At TFL,
majority of measures were developed by employees.
Apart from the performance indicators, the financial ratios of liquidity, profitability and
financial structure ratios became important for TFL management. TFLs balance sheet
showed strengthening results over the years, partly due to BSC, total quality management
practices and other commercial goals. Return on assets, for example, averaged 12% from
2001 to 2006 while return on shareholders fund improved from 17.5% in 2000 to 39% in
2006 (ATH annual report, 2006).
According to an interviewee, once the key performance indicators (KPIs) were developed,
which included customer consciousness as one of the five factors to be evaluated in terms of
customer complaints, peoples attitude changed and they gradually began to accept business
routines. The aim was to also reduce defects in the telephone lines. A manager commented:
There is no doubt that quality has the strongest connection with customers. Thats why we put the greatest emphasis on quality. Decrease defect rates and dont deliver defect services to our customers. These are the focal points in our continuous
improvement activities.
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20
Also, to have resisted business practice change would have been unhelpful for employees
career prospects. Those accepting business practices were rewarded in the form of quarterly
bonuses which were not extended to those who opposed business practices. There were some
employees who resisted the BSC. According to a manager the resistance came from old
workers. He summarized the resistance as:
Older horse possibly take longer to understand the new race course.
Those who did not get bonuses were mainly people who received below 70% in their
quarterly performance report. Chenhall (1997) points out that an important concern in the
implementation of business practice such as Total Quality Management and its relevance to
MACS is the extent to which such practices are developed together with a managerial
performance evaluation system. It is argued that business practice is enhanced once
managers and employees are evaluated on the basis of non-financial measures such as
customer satisfaction (Chenhall, 1997).
As a movement towards the BSC exercise, TFL management established in-house and
external training programmes for all its employees which included commercial awareness
courses. The following interview quotes illustrate this:
We develop our staff. We send them for training and further studies at the University
of the South Pacific, the Fiji Institute of Technology and the Training and
Productivity Authority of Fiji.
We gave our people a lot of in-house training including customer service training
which is conducted by external consultants. This makes employees more sort of
responsible in the manner they deal with customers. We also depend a lot on
information systems that provide reports so that we can give quick answers to our
customers.
We have a number of people qualified in Masters degree. A number of people have BA Economics or BA Accounting or Management. People are still studying. We
also sponsor people for Training and Productivity Authority of Fijis short-term courses. People also have opportunity to bring their new ideas to the company and we
say to them okay this idea is fine as long as it is beneficial to the company. We have
been training people a lot even by sending them on overseas trip for short courses.
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21
I previously have been to Japan, Australia and New Zealand Telecom and brought the
ideas from there, blended and retuned it until it fitted into our system. Once it fits into
our system, then it is okay.
An additional employee perspective was also common at TFL apart from the traditional four
perspectives of BSC. Such attributes included professional attribute/ interpersonal
relationships. Under the employee perspective, a technicians BSC would include ensuring
repair works on all faulty products were carried out in accordance to manufacturing
specification, ensuring health and safety procedures at workplace were carefully observed
and to observe and adhere to service targets. Training and development needs were also
identified for the incumbent by an assessing officer. Other employee attributes constitute
team work, analytical skills, effective communication, self management amongst others.
Through the BSC practices, individual performance is evaluated, based on routine tasks and
current year work plans which were derived from the companys broader action plan and the
operational KPIs, which were used for staff evaluation (see Appendix 2).
The individual workers were assessed by their superiors on a quarterly basis and are allocated
marks out of 100 on BSC achievement. A manager at a regional office in Nadi commented:
BSC practice is measured on individual accountability. Individual workers are
allocated marks out of 100 by their respective supervisors. Some of the key
performance measures at the regional centres are: punctuality, maintaining error free
work and disputes in terms of customer complaints.
Through BSC we dont measure time, but performance. Previously in government
days, people used to fill time by working from 8:00-4:30pm. Now they work beyond
4:30pm to ensure the assigned work is completed.
One of the managers who was interviewed at lunch hour responded about his employees:
Some of my people as you came down; you would have seen that they are still
working at lunch time. Thats the change, the biggest change we have seen in our
people. I dont care if you want to have two hours off to pay your bills and all that
but end of the day I want the report whatever I wanted from them. How one utilises
the time, it is upon them. But there is a strict target on your head. Everything is
based on targets here. Everybody has been set against BSC like KPIS. Before there
was no BSCs. We have set BSC targets, we give them time frame, and you must
finish that kind of job. I need those reports because I have to make decisions based on
their answers.
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22
An interviewee stated that amongst some of the common accountability areas in which
people are evaluated are profitability and staff development. The staff development
encompasses expected versus actual performance in terms of training undertaken. As for
customer perspective, the key accountability factor is the quality of service in terms of line
repairs which, for residential customers, are as follows:
80% of customer line repairs to be done in 24 hours after receiving a
complaint;
95% of customer line repairs are to be done in two working days after
receiving a complaint;
100% of residential customers line repairs are to be done in five working days
after the receipt of a complaint.
For corporate customers, 80% of the line repairs were to be done within two hours of
receiving complaints. According to an engineer, once a complaint (fault in line) is received,
it was logged in the computerised Integrated Customer Management System and had to be
cleared within a specified time limit. TFL managers and employees were result-oriented.
The use of new BSC practices allowed employees to be rewarded for bonuses if they
exceeded 70% in their quarterly BSC report. A Human Resource Manager commented:
There are a number of rewards in the company. If one performs one gets a bonus. If
the company performs better than budgeted amounts, you get extras, and also on top
of that is the Cost of Living Adjustment rewards.
A Quality Manager commented:
The BSC targets are within the reach of employees and encompass both financial
and non-financial indicators and are a fair system.
Some workers possibly did not consider BSC as a fair system as will be evidenced in the next
sub-section. A manager stated that non-financial targets relate to customer queries. TFL has
been instrumental in setting up customer contact centres in various urban centres in Fiji.
Through this centres the companys management are readily able to capture customer
complaints, number of telephone faults reported and so on. A senior manager commented:
We give our own people a lot of customer service training courses in-house as well as
externally such as attending customer service courses at the Training and Productivity
Authority of Fiji. This makes employees sort of responsible in the manner they deal
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23
with customers. We depend a lot on information systems that provide reports so that
we can give quick answers to our customers.
Another manager commented:
Customer is the source of revenue and so in order to maximise profit we need to keep
them happy.
An engineer stated:
Customers are important for us. Before we used to call them subscribers to telephone
but now we call them customers. Our focus has changed. We need to keep our
customers happy to retain profit and earn bonuses.
There is the view that non-financial performance measures of employees are better indicators
of management effort (Ittner & Larcker, 1995, 1997; Banker, Potter & Srinivasan, 2000).
Non-financial measures need to supplement financial measures to provide support for
business practices (Hoque, 2003). The non-financial performance measures can provide
feedback to decision makers on the outcomes of their efforts (Chenhall, 1997). The feedback
from PMS provides information to enhance managers and employees to achieve performance
goals.
Through the BSC of TFL participants, business practices became routinised within TFL.
Employees were rewarded with bonuses on achievement of 70% and above on their quarterly
BSC assessment. This bonus reward would be equivalent to a fortnights pay for an
employee. According to a manager, the BSC practices regime creates and demand systems of
surveillance and trigger discipline amongst TFL employees. A manager claimed that the
employees perform to achieve desired outcomes and receive a bonus, which is a motivational
instrument. According to an interviewee, BSC practice is used as a form of discipline, a
way of making TFL workers more efficient, focused and compliant. That is, they are
institutionalised as part of shared norms of discipline and result-oriented. An interviewee
claimed that self-interest by participants in the form of bonus payments motivates them to
adapt to business practices. The next section examines the resistance by the employees about
the possibilities of BSC.
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24
6.3 Reservations about the possibilities of BSC practice
This section presents evidence from employees and managers to demonstrate how BSC
practice was not working for some of them. While interviewees in the study believed
positive benefits would eventuate from a BSC, there were concerns about the best way to
localize it. These concerns were acknowledged by a senior manager:
My concern is accuracy of measures. Some measures are subjective which needs to
be removed.
A manager commented that the BSC like PMS still had some bias due to Fijis communal
nature of society which includes tribal loyalty and tribal rivalry. It is a challenge to keep
quarterly bonus confidential due to the close relationship that employees have with one
another in accordance to the Fijian culture. A manager sated:
Sometimes people may say how come, for example, Timoci got the bonus while I
didnt and I worked much harder than Timoci. These sorts of problems were ongoing at TFL.
A senior manager proclaimed that they were attempting to make the system as transparent as
possible and ensuring that the system was fair. He highlighted the problem as:
In a work place there are people who feel that they have not been rewarded the way
they expected of course. Last thing we can think of is two human beings are involved
and the relationship may be affected. Then we are always requesting managers to be
working on performance rather than looking at who the performer is.
A manager commented:
Workers, in particular, the traditional ones are conservative and do not want changes.
We still have some around. These workers feel that in terms of assessment if there is
a payout, give everyone 2 to 3% irrespective of whether they perform or not. People
say we all play for this team. If there is $1000 given to team, everyone should get a
share of that. For example, with ten players, they should each get $100. But BSC
looks at each player; this is where the difference is. Some people still argue that we
all should get equal share rather than that being distributed inequitably.
The above comments reflect Fijian societys communal relationship where they believe in
sharing and caring. Kerekere system is pervasive whereby if a person seeks assistance in
form of goods or money and the other person has it, then this cannot be denied. Denial may
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25
represent being unfijian and an insult to the culture. Kerekere demonstrates the generosity of
Fijian culture.
A technician had some scepticism of the system. He commented that sometimes they had to
go to the interior, several kilometres from the city on the gravel road, for maintenance
purposes. It may take hours to reach there. The company does not take into consideration
the travelling time. The worker responded:
Roads in the interior areas are pretty bad gravel roads with lots of pot holes that are
not so good for the vehicles. To reach area like Monosavu, it takes two hours from
here (Tavua). The speed limit is 80km per hour. If someone is caught driving beyond
that speed limit by the police, then they are fined and the driver has to pay the fine in
quest for reaching the target and not the company, TFL. The company does not
consider our grievances here.
Another manager commented:
There was some kind of resistance when PMS was initially implemented. PMS is all
about information. When you got to understand the whole exercise, it works well.
There was contention at the beginning that a lot of paper work is involved. In the
initial stages people had to spend their weekends catching up with the paper work,
The employees at the initial stage had to set goals for themselves and their subsequent
accomplishment alongside their job description which meant that a lot of time had to be
invested in that exercise. The assessing officer reviewed this and the goals may have to be
subsequently revised or rewritten extensively. This was all happening around the
introduction of PMS. Over time it led to a standard bulky document of 8 pages which now
have been reduced to 2 pages only, overcoming some of the resistance of the past. The
managers expected resistance to BSC as it brought an increase in workload. The technicians
claimed that there was a lot of administrative (paper) work after coming back from job sites.
A manager expressed some scepticism of the PMS as follows:
There are some elements of subjectivity in the PMS. There is some victimisation as
well. If one doesnt get along with their boss, then they may become victimised. Some rating is given by judgement. In Telecom, we know one another and some
people are even related and thus the system can have biasness.
While data manipulation may be an issue, the senior managers championing the BSC were
also concerned about limitations of the existing management information system. Much of
the information was not useful as a manager explained:
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26
A lot of time when we have data, we do not make best use of itthe data may be all over the place.
The unintegrated and manually intensive nature of TFLs existing system was seen to be
problematic. According to a manager, there was a lot of manual recording of data which
possibly needed to be done electronically. As a non-human actor, the management
information system limited the possibilities of what the BSC might become. A manager
proclaimed that BSC possibly shaped more cooperation, productivity and businesses. The
BSC shaped actors to assimilate business practices. The next section brings the narrative
together in relation to the theoretical framework and concludes the paper.
7. Discussion/Conclusion
This paper presents some evidence on an aspect of the design of a strategic control at a micro
level within TFL. The research aimed to illustrate how the BSC has been used by the
company as a calculative tool to enrol employees on the path to commercial business
practices as the organisation moved from corporatisation to privatisation. Institutional and
practice theory have been utilised to inform the case study. BSC as a practice perspective is
concerned with the relationship between what BSC promised to do and what BSC actually
does (Vaivio, 1999). The BSC practically links performance measures with business strategy
(Otley, 1999). Otley (1999) points out that traditional BSC did not emphasise BSCs link to
reward structures and other perspectives such as employee perspective. Our paper attempts
to address these issues.
BSC was used as a calculative tool to enrol actors into commercial business routines.
Participation in the BSC process included the staff who were the key users of the
performance measures developed. The study suggests insights into how BSC practices
became integrated with MACS. Practice theory emphasises the role of actors in drawing
upon rules and routines of BSC practice. The CEO and senior managers were the
institutional entrepreneurs introducing BSC at TFL. The main institutional entrepreneur was
the CEO. Our practice perspective emphasises the way in which BSC comes to be
constructed through the daily activities of individuals engaging with each other and
interacting with management control system of BSC. The majority of measures were
developed by employees. Our paper made an effort to address the relationship between
innovation and institutions (Burns & Scapens, 2000); Dillard et al., 2004). There have been
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27
scarcely any explicit efforts to draw upon practice and institutional theory to address how
new practices such as BSC are created and enacted. While traditional BSC framework
emphasised on the four perspectives of financial, customer, learning and growth and internal
business, our study shows that an additional employee perspective is utilised by TFL.
Future research may like to expand on institutional theory and practice theory on other
organisational case studies in other settings on BSC practices. Cultural practices and their
implication on BSC practices in settings like Fiji may provide new insights so that possibly
cultural dimensions may also need to be added to BSC dimension. Fijian society is more
communal in nature; power distance is large and ahs a high uncertainty avoidance society.
Kerekere (borrowings) is pervasive with no intention of returning what is borrowed
showing the generosity of the culture. Such cultural attributes may make Fijian case studies
somewhat unique. Our study shows that an additional perspective in BSC of employee
perspective is widely utilised at TFL.
Our findings have both theoretical and practice implications. Different actors hold various
interpretations of BSC; there are various translation of BSC which sustain the multiple
possibilities informing the overall implementation process of BSC.
There are implications for practitioners as well. The study provides practitioners with an
understanding of how the BSC functions. Managers need to be aware that a BSC emerges
from a particular network that shapes its possibilities. As Sandhu et al. (2008) note that BSC
does not exist as an independent and external object waiting to be implemented; rather it has
to be translated locally. The practitioners or consultants may also need to be aware of
cultural attributes of Fijian society in order to implement practice changes locally. Lack of
sensitivity to local culture may shape resistance to organisational change practices such as
BSC.
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28
Appendix 1
Figure 1 ATH Ownership Structure
Telecom Fiji
Limited
(100%)
FINTEL
(51%)
Trans
Tel Ltd
(100%)
Xceed
Pasifica
Limited
(100%)
Internet
Services Fiji
Limited
(100%)
Vodafone Fiji
Limited (49%
Vodafone
Europe BV
Holdings)
(51%)
Fiji National
Provident
Fund 58.2%
Institutional &
Individuals
7.2%
Amalgamated Telecom Holdings Ltd
Government
of Fiji 34.6%
ATH Technology
Park Ltd-
proposed owner
and operator of
technology
park
(100%)
Fiji
Directories
Limited
(90%)
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29
Appendix 2
-
30
Appendix 2: Performance Assessment Forms continued
-
31
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